What is a Traditional IRA?

A Traditional IRA is a type of Individual Retirement Account that has some tax advantages. It is a place to house investments that will be used when you retire. The account can contain a variety of investments, including stocks and bonds, mutual funds, CDs, and more.

There are no income restrictions for a traditional IRA, anyone can open an account as long as they are under the age of 70½. You can start withdrawing funds from your account at age 59½, but you don’t have to start withdrawing funds until you reach age 70½. If you choose to withdraw funds before age 59½, you may be required to pay a withdrawal penalty. There are certain conditions that are exempt from the early withdrawal penalty, including using the funds to help buy your first home or to pay for certain medical expenses.

Each year, you can contribute a certain amount of dollars to your Traditional IRA. The amount you contribute in a given year can be used as a tax deduction. Instead, you’ll pay taxes on the money as you withdraw it.

To open an account, you can go through a bank or a brokerage house. You usually get more options with the brokerage firm, so that’s something to consider in your decision. There is usually a minimum dollar amount to get started, and sometimes there is a certain limit that you will need to contribute each year. Setting up an account is fairly simple and a financial planner at your chosen financial institution should be able to easily help you get started.